Past Issue

The Competition

By Dan Petrelle

02/01/14

Making an Assessment

Building a car wash or purchasing an existing one can be a very expensive venture. There are many factors that need to be considered when purchasing a wash such as location, car count, labor pool… you get the picture. However, none are more important than assessing your competition. Some people may argue that location is everything, but at the end of the day your competition is not going to simply give you their business and, even if they sell out or operate poorly, their location will eventually be improved and/or sold to someone who will improve it.

That being said you should always look to differentiate yourself from the competition. Building the same type of wash with one more bell or whistle is not going to be enough to sustain long-term success at your location. Worse yet, the more successful you are the more likely someone is going to think they can come in and do it better. Therefore, assessing what your competition can do to improve their site and how their location stacks up against yours is critical. In our operation, we have underestimated competition in the past, and we have been underestimated by our competition. So let’s discuss a few key areas about your competition to consider.

MARKET POTENTIAL

A lot of operators in the business have a formula for how the market divides up with competition in the area. This is important because it would be impossible to assess your competition’s potential wash count — even if improved — without knowing the potential size of the market. Many operators use a 3-mile to 5-mile approach when determining market size. This data is readily available on the Internet through city data or Google Earth. Traffic counts for major roads can be obtained through most DOT sites. Once you’ve determined market potential, you then assign a percentage of the market to your competitors based on a couple of factors. Location and traffic count tend to be the biggest drivers of volume, but appearance of the location and how well it operates play a role as well. Regardless of the formula you use to determine market potential, it is always wise to consider what the market will do should your competitors improve their location.

SCOUT THE COMPETITION

Counting cars at your competitors’ location can be an effective way to determine a site’s current volume. You should always speak with multiple vendors within the market to determine what information you can glean about that specific location and learn about any seasonal patterns. Joining a local car wash association or going to their events is a great way to meet vendors and operators to get a lot of your questions answered. Just be sure to find out seasonal effects on the local industry. For example, car washes in the Northeast tend to be extremely busy after a snowstorm. So, if you were to visit a site on a Saturday after a snowstorm, you could potentially overestimate the site’s volume and, conversely, during a rainy weekend underestimate it.

Once you’ve determined your potential market size, counting cars is an important exercise to verify your predictions of your competitor’s volume to see if your thinking is accurate about the market. Typically you’re going to want to count multiple days for multiple hours during the week and on weekends. Be sure to count on both cloudy and sunny days to determine what a location may actually be washing. The relationships you develop through the local associations will be very valuable in determining what car wash volumes typically do in each season so be sure to take that information into consideration when counting your potential competitors’ volume.

While you are at competitor locations, take a good look at their operation. Do the employees seem well managed and well trained? Are they in uniform? Is the business in good repair? This is the time to determine what a competitor can do to improve their location. For example, if you are thinking about adding free vacuums, does your competitor have the space to do so? If not, it may be a nice point of differentiation. Can they add a lube? These are the type of questions you need to be asking when visiting the location. What would you do with that location if a competitor came to town? Assume competitors will improve their operations. Determine why your new location trumps theirs and what you can do at your location that they cannot.

Asking around town how the locals feel about a certain location or even surveying customers at local markets can help you gather information about your competitors as well. Customers will give you insights as to what they like about a location and what they dislike. This could prove to be very useful when designing your new location. Watching advertising within the local market will also give you an idea of what your competition does to bring in new business. Small marketing budgets typically mean weak marketing programs. Identifying such weaknesses will prove to be a huge advantage when marketing your own business.

Check with municipalities to see how your competitors are perceived in town. Are they compliant with sign ordnances and traffic issues? Do they follow regulations or do they stretch the rubber band? Check local regulations to see if they are compliant. Things like signage, noise, and water-runoff violations tend to be overlooked by the town and, if addressed, can be areas that force competitors to comply in ways that makes their businesses less profitable or efficient.

SWOT ANALYSIS

SWOT (Strengths/Weaknesses/Opportunities/Threats) analysis is the final step in assessing your competition. I recommend doing a SWOT on each competitor as if you owned the location. Then do a SWOT on your future site while considering each of the competitor reports. This will help you determine what services you should offer at your location to help market and differentiate your brand within the market.

SWOT analysis is simply listing a site’s strengths and weaknesses based on the site as it is today, then creating a list for that site based on its opportunities and potential threats from external factors. For example, if your only competitor is located on a side road with poor signage and rundown equipment but has a large lot, its SWOT may look something like this:

Strengths:

• Large lot — could add lube or free vacuums

• No other competitors

• Plenty of stacking for cars

Weaknesses:

• Old building / rundown

• Poor signage and visibility

• Low traffic count

Opportunities:

• Lack of competition — more aggressive marketing program

• Add free vacuums

• Add an unlimited program to lock up the market

Threats:

• Weak zoning laws — more competition

• High gas prices — low end of the market may struggle to wash

A SWOT in writing, not only on your competition but also on the market as a whole, will give you a good platform to develop service offerings and a strong marketing program. SWOT analysis should be done every six months to make sure you keep abreast of what your competitors are doing and how you should be responding. Whatever you decide to do when assessing your competition, it should be something that you take very seriously when investing in car washing. The markets can be expanded slightly if they are underserved but, ultimately, when car washing becomes a commodity they trade on price.